With increasing frequency, property and casualty insurers are recognizing the need to gain efficiencies in order to maintain a competitive advantage in the marketplace. Executive claims leaders understand that leveraging such efficiencies will improve everything from cycle time and quality to disposition and policyholder retention.

Carriers that underperform will be left in the wake of those who leverage the three key components of success: people, processes, and technology. By better understanding the importance of each, it becomes possible to lay the foundation upon which success can be built, giving organizations an incredible competitive advantage in the marketplace.

The People

Across my 20 plus years as a claims leader in the P&C industry, the mantra remains “do more with less.” Irrespective of one’s position, be it tactical or strategic, the focus is often on reduction.

Make no mistake that less is often more, but only when it is done properly. In many organizations, headcount can account for more than 50 percent of total operational expenditures. But what happens when reductions in force result in deterioration of quality, disposition, severity or expenses?

Having the right people in the right position is critical to both quality and outcome. There are good, there are bad, and there are mediocre. As is often the case, the focus should not be on quantity, but rather on quality. And by effectively leveraging the best people with efficient processes and technology, insurers can gain the ability to redeploy people in order to maximize efficiencies and results. Innovative claims leaders are not only embracing change and executing basic blocking and tackling moves, but are forging strategic alliances with experts who are redefining claims processing techniques.

The Processes

While virtually every insurer has variations to processes, the end to end life of a claim really is not that divergent. From first notice of loss (FNOL) through ultimate disposition, similar milestones are found across the industry. People are contacted, property is inspected, liability is assessed, negotiations commence, and settlements are arrived upon.

While the process to get through the milestones may vary, such as centralized, decentralized, in-house, or outsourced functions, the results are often similar. There are delayed contacts, improper liability decisions, estimate overwrites, and missed subrogation opportunities. Alone, these are significant; when combined, they provide an astronomical opportunity for improvement.

Nearly 15 percent of all claims are closed with a missed subrogation opportunity at an industry cost of $15 billion dollars annually. By adopting a proactive approach to subrogation identification, employing predictive modeling and revamping metrics and reporting, leading insurers are dramatically reducing leakage in this arena.

The Technology

To effectively leverage people and processes, technology can serve as the catalyst to move claims from high cost/low performing channels to low cost/high performing channels. Claims channels may consist of estimating, claims processing, or subrogation response. When properly utilized, technology will improve every aspect of these claims handling processes.

In both claims and recovery operations, the most innovative of industry leaders will effectively attack cost control opportunities. These leaders will redefine the property and casualty space with not only bold visions and audacious goals but cutting edge innovation and processes that will improve speed, accuracy, and cost containment.

But insurers cannot do it alone, and must rely on business partners with expertise, resources, and the claims acumen to seamlessly integrate claims technology into a transparent workflow. It is this consulting relationship that will define success in the coming years, as monumental changes fundamentally transform the life of the claims process.

In several key areas, insurers are leveraging technology to make dramatic improvements in cycle time and severity while at the same time reducing expenses. Here are a few:

FNOL. In years past, it was not uncommon to report claims during “business hours.” Often, these reports were made to a local agent who then transmitted the facts to the insurer of record. Fast forward to 2011 and this process is a 24/7 deliverable 365 days of the year. Increasing numbers of insurers are leveraging innovative technology to capture loss reports by live agents in multiple languages, often with the capability of having adjusters responding to the scene. The most innovative are incorporating GPS tracking enabling the carrier to proactively identify everything from a vehicle breakdown to an automobile accident.

Property damage appraisal. While getting to scene of an accident can give an insurer a significant advantage in controlling claim outcomes, so can empowering the customer. A new cutting edge innovation carriers are calling “customer choice” or “self service claims” is being deployed by some of the nation’s largest insurers. This process enables the claim party to self guide the repair process with external interfaces controlled by the insurer. Like an eye in the sky, this can be done with virtually no carrier staff commitment, freeing up internal resources for redeployment to more critical functions.

Liability assessment. Arguably, liability determination is one of the most challenging of all claims processes. It is also one of the most underutilized adjusting tools. Errant liability decisions, often assessments of zero percent or 100 percent, result in billions of dollars being left on the table annually. According to Jury Verdict Research, a national organization that tracks such data, rear end (or clear liability) accidents accounted for only 45 percent of auto cases adjudicated. The remainder of accidents were comprised of intersection, lane change, parking lot, or other types of losses involving shared liability. Through a combination of training, technology, and reporting, insurers can take necessary steps to improve liability assessment and outcomes.

Subrogation response. It is no secret that claims adjusters are extremely busy, often multitasking in order to meet the most basic of goals. Despite the hectic schedule, many are tasked with even more duties, such as responding to subrogation demands. On a good day, this is challenging. On a typical day such tasks often get overlooked or overpaid. New patented technology for auto property subrogation being used by nearly half of the top 15 P&C carriers takes this process off the adjuster’s desk, identifies historic alternative parts availability, and results in a settlement that is significantly lower than carriers are seeing today.

These types of innovation are redefining traditional norms by changing the adjusting paradigm from reactive to proactive. Not only is this good for carriers, but also for consumers who will reap the benefits of improved results that can be passed along in the form of more competitive premiums. Carriers can then grow their market share while continuing to deliver record results to policyholders and shareholders alike.

Claims Innovation

In my book Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary, it is noted that a critical function of innovation is change. Far too often claims organizations are muddled in mediocrity because they have become static. What is done today is what was done last month, last year, or even a decade ago. There is a lack of creativity, innovation, or dedication to moving the organization forward.

In many respects, managing a claims organization is a lot like managing a football team. There are defined metrics and goals to achieve, conquer, and win. Like a championship football team, the effective organization blends leadership and talent in a way that sets them apart from the competition.

With a recipe for success, why is it that so many organizations succumb to mediocrity? From the biggest to the smallest, public and private, there are those who do achieve, those to attempt to, and those who just seem to get by, satisfied with mediocrity.

At the core of innovation are people. From the leadership down to the rank and file employees, building the winning organization takes talent, time, and being savvy. A common denominator in many struggling organizations is bureaucracy and complacency. Far too many have been given tasks in a culture where silos have not given way to cross-functional cooperation, impeding a company’s ability to become great.

To understand effective leadership, consider Vince Lombardi, arguably the greatest coach in NFL history. When he took over the Green Bay Packers in 1959, they were coming off of a 1-10-1 season. When he departed 9 years later, he left behind one of the greatest dynasties in football history. Lombardi succeeded because he challenged the status quo and had no room for the half-hearted. He had a unique ability to hone in on players’ talents, maximizing both their physical and mental abilities.

The business world is no different, with successful organizations keying in on leaders who have the ability to facilitate change, like Lombardi, who approach their challenges with a “no lose, try hard,” old-fashioned system. By identifying A players, motivating B players, and removing C players, any leader has the ability to fundamentally transform any organization. Often, the catalyst for this process involves leveraging technology to improve process, workflows, and outcomes.

The Future of Claims

To put everything in perspective, consider the claims process 20 years ago. Manual processes resulted in a lengthy duration for the life of a claim. Agents often took reports and transmitted them to the insurer. Adjusters would manually review files, take days to contact customers and even longer to inspect vehicles. Reserves were adjusted manually after handwritten log notes were jotted down in a hard file.

Today, we live in a world of technology that has evolved more in the last 2 years than in the prior 30 years combined. Insurers are generally automated, and many are becoming paperless. The handwritten estimates have been replaced by computer generated sheets. Television and social media are commonly used to get the message out about how a given carrier can do things better, faster and cheaper than a competitor.

Even the changes of the last 2 years will be dwarfed by the changes yet to come. That is the reality of the day and age in which we live. Those carriers who are at the forefront of the evolution are the ones that will stand the most to gain. The true innovators who accept change as the only constant will gain even more.

Those who will redefine the industry will not only adapt to change, but become the catalyst of change. These are the companies, insurers and service providers alike, who recognize that change is a constant and always seek to stay ahead of the curve.

From contacts and inspections to liability decisions and settlement negotiations, nothing will be the same in 5 years. Nor should it be. There is always room for improvement, and one constant in ubiquitous throughout the insurance industry are opportunities to do just that.

From how claims are reported to how vehicles are inspected to how liability is determined are just a few of the critical opportunity areas that lie ahead. From inception to closure, the goal should be to do things better, faster, and more accurately than has ever been achieved to date. It is this mindset that will enable industry leaders to emerge as they gain a competitive edge in the marketplace.

Christopher Tidball is an executive claims consultant with HyperQuest, Inc., a claims technology company that provides service based solutions to the P&C industry. He is a former claims manager, quality assurance director, and executive leader for multiple top 10 P&C carriers and is the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary! He may be reached at (904) 742-9031; ctidball@hyperquest.com.

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Gaining a Competitive Edge Through Innovative Claims Processes

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